Landlord purchases of rental properties have plunged to a record low, leading to a shortage of rental properties and rising rents across Great Britain, research reveals.
According to a report by Hamptons, just 10% of homes sold in the first half of 2024 were bought by landlords, the lowest level since records began in 2010.
This is a big drop from 16% in 2015, before tax and regulatory changes made buy to let investing less attractive.
The report blames several factors for the decline in investor purchases, including higher mortgage rates, political uncertainty and the threat of further rental regulations.
‘Fewer investors entering the market’
The firm’s head of research, Aneisha Beveridge, said: “Rather than a mass landlord sell-off, the lack of homes available to rent has been caused by fewer investors entering the market.
“Tax and regulatory changes introduced since 2016 have been the main culprit, but these disincentives to invest have been compounded more recently by higher interest rates and political uncertainty around the threat of more rental reform.
“If investor purchases and sales continued at 2015 levels, there would likely be 450,000 more private rental homes in Great Britain by the end of this year.
“This is roughly equivalent to the total number of homes in Birmingham.”
Cash-rich, larger portfolio landlords
Ms Beveridge continued: “Most investor purchases this year have been driven by cash-rich, larger portfolio landlords who continue to expand their portfolios.
“The lack of supply is one of the main factors underpinning strong rental growth and this is unlikely to reverse any time soon.
“The challenge for the new government, which is keen to boost homeownership, is to increase security and the quality of homes for tenants living in the rental sector without disincentivising or pushing out more landlords.”
She adds: “While some of the homes that previously would have been bought by an investor have found their way into the hands of a first-time buyer, high mortgage rates and rising rents are likely to lock out many would-be homeowners over the next few years, keeping them in the rental sector for longer.”
Landlords have been put off investing
Hamptons also makes clear that landlords have been put off investing by tax changes introduced since 2016, which increased the cost of buying investment properties and reduced profitability for some landlords.
As a result of fewer investors entering the market, the number of homes available to rent has shrunk considerably.
There were 42% fewer rental properties available in June 2024 compared to June 2016.
This lack of supply is pushing up rents.
The average tenant in Great Britain paid £1,347 per month to rent a new home in June, a 5.8% increase year-on-year.
This means rents are rising nearly three times faster than inflation.
Scotland has seen the biggest rent increases, with rents on newly let properties rising 11.1% year-on-year.
London, however, is experiencing slower rental growth, with rents in inner London even falling for the third consecutive month.
